Moving To Another Owner Occupied Home
If you currently own an owner occupied home and are thinking of moving to another owner occupied home and selling your current owner occupied home after you move, there are several things that you need to consider. First, the purchase of another owner occupied home needs to make sense. If you got a job transfer that is 60 miles or further from your current home, then the deal makes sense and you will most likely qualify the new home purchase going the owner occupied route. However, if you are purchasing another home which is close by your current owner occupied home and the new is the same value and size, then the deal does not make sense. On the other hand, if the new home purchase is nearby your current owner occupied home but it is substantially larger and the reason for your move is because your family have outgrown the current owner occupied home, then the new home purchase will qualify as an owner occupied home. By substantially larger, we are talking at least a 30% increase or greater in square footage. It can be other factors as well such as downsizing to a townhome or condominium or smaller home due to the borrowers children no longer living with the borrowers. Before you decide on purchasing another home as an owner occupied home, check with a mortgage lender and see if they can do the deal as an owner occupied home. There are other considerations that you need to think about.
Purchasing And Moving To Another Owner Occupied Home
If you intend on keeping your current owner occupied home and buying another owner occupied home, you need to qualify for both mortgage loans. There are instances where having two mortgage payments can disqualify you due to going over the required debt to income ratio requirements. One way to solve this problem will be to state that your first owner occupied home will be a rental and that you will be renting your home after you move to your new owner occupied home. In order to do this, mortgage lenders require that you have at least a 25% equity on your first owner occupied home. If you do not, you do not have to refinance it but need an appraisal done on your first owner occupied home and pay down your mortgage loan so that the loan to value is at 75% and you have 25% equity. The appraiser will list the market rental rate for your home and the mortgage lender will use 75% of the market rent as rental income.
Rental Income: Case Scenario
There are many cases where a homeowner has an owner occupied home but rent the home and live elsewhere. Cases like this is common where the homeowner gets married and live with their new spouse and rent out their current owner occupied home. If the homeowner has a rental lease and has been declaring the rental income of their owner occupied home for at least two years on their tax returns, then the full rental income declared on their tax returns can be used. On this particular case, 100% of the rental income can be used and not the 75% of the market rent since it has been declared on their tax returns.